World Economy

Bonds Benefitting Argentina

Bonds Benefitting ArgentinaBonds Benefitting Argentina

In raising $16.5 billion in the largest emerging markets bond ever, Argentina finally ended its long-running legal battle with creditors and sloughed off its status as market pariah.

With its first bond deal in 15 years, Argentina raised enough to pay the approximately $9.3 billion owed to holdout investors and still had plenty of funds to spare, CNBC reported.

The sovereign can now stay out of the international markets for the rest of this year and fully fund the targeted 2016 deficit of 4.8% of GDP.

Secretary of Finance Luis Caputo told the International Financing Review that the country would be able to do so through local markets, new multilateral lending and in a “diminishing degree” through central bank financing.

“We will be very active in managing our liabilities, trying to achieve the most cost savings,” Caputo said, stressing that the development of local markets will be a priority.

But he declined to rule out another tap this year to pre-fund the country’s budget in 2017, when the government hopes to cut the deficit to 3.3% of GDP.

“If down the road we notice through reverse enquiry that investors’ demand remains high, and the price is right, we would pre-fund,” he said.

With $69 billion in demand, Argentina was able to win the tug of war with investors, many of whom said they would never buy into a 10-year from the sovereign with less than an 8% handle.

On the day, however, leads tightened talk on the 10-year, the centerpiece of the deal, by 50bp before pricing it at par to yield 7.50%.

Deutsche Bank, HSBC, JP Morgan and Santander were global coordinators, with BBVA, Citigroup and UBS as joint books.